PZ Cussons Plc

Good afternoon all and welcome to today's PZ Cussons full year results call. My name is Adam and I'll be your operator for today. If you'd like to ask a question at the Q&A portion of today's call, please dial in and press star 1 on your telephone keypad. And I will now hand the floor to Jonathan Myers to begin.

Thank you Adam and good morning and thank you to all of you for calling in to our results presentation for PZ Cussons financial year ended 31st of May 2026. For those of you viewing the slides as we're presenting this morning, you can see straight away an example of how we built stronger brands last year. Here's us making a splash on Marble Arch about original sources tie up with High Rocks. The London leg of this global indoor fitness competition was a perfect opportunity to promote our latest innovation, the men's workout recovery range. Not only were we able to distribute tens of thousands of product samples at the event, we were also able to generate more than 16 million views online. Turning to the agenda for this morning then, I'll start with a brief introduction before handing over to Jan. Some of you will have met Jan already since she joined four months ago, and she'll share some reflections from her fresh eyes before getting into an update on our financial performance. I'll then provide a broader update on strategic progress before a chance for you to ask any questions. So without further ado, let's get started. And there's no better place to start than a reminder of the investment case we set out at our capital markets event back in February. We have winning portfolios of locally loved brands. They play in our three core categories and our four lead markets. These brands are supported by two other attributes which we also see as a source of competitive advantage. Our go-to market capabilities, and our manufacturing scale and agility. Our portfolio is well balanced, with each lead market playing its own role in delivering for the group overall. As Jan will cover, our balance sheet has been significantly strengthened and we have set out a clear capital allocation policy. Overall, this gives us confidence in our growth ambition and target of double digit total shareholder return through the cycle. Put all of this together, along with the actions taken following our strategic review, and we are now a more focused and more resilient business. So what of FY26 then, as we look through the lenses of this investment case and our refreshed strategy? Well, overall, we've seen some early signs of delivery. Performance was broad-based, with growth across all four lead markets and our top 10 brands. Our ability to step up investment in brand building activity to the highest level in recent years is paying off, supporting growth across the portfolio and enabling us to invest in the development of future innovation and activation plans as we build multi-year growth plans. We have seen a continued reduction in FX risk in Nigeria as our actions have materially reduced sensitivity to future currency fluctuations along with the ongoing implementation of guardrails that we set out in February and we have a significantly strengthened balance sheet not least thanks to growth of 12 million pounds in free cash flow as a result the board is proposing the resumption of dividend growth the first increase in four years like all companies in our sector we are of course mindful of the macroeconomic environment in which we're operating However, we have started the year in line with our expectations and are pleased to confirm that the outlook for FY27 is in line with market expectations. We remain confident that we are well placed to continue delivering sustainable growth over the long term. Now with that, I'll hand over to Jan.

Thanks, Jonathan. Good morning, everyone. It's great to be here presenting my first set of results at PSED Cussons. and I look forward to seeing some of you in person in the Roadshow over the coming weeks. For those I haven't met yet, I joined PZ in late March from Severfield, where I was the interim Chief Finance Officer. Before that, I was the CFO at Manchester Airport Group for more than five years. During this period, I oversaw the delivery of major investments and transformation projects, such as Manchester's $1.3 billion investment in Terminal 2, as well as operational efficiencies, technology advancements and finance transformation. I also led the refinancing and operational response as we navigated through the COVID pandemic as passengers fell from 60 million down to zero and then back up to 60 million. Prior to that, I held a number of senior commercial finance roles in global businesses across Europe and the U.S. having started my career qualifying with PWC where I worked in corporate finance in M&A lead advisory. Before we get into the numbers, I thought it would be helpful to share some observations from my first few months in the role. Firstly, PZ Cussons is a brilliant company with a fantastic portfolio of locally loved brands, a number of which have long featured in my own household. I've loved meeting so many colleagues in my first few months and it's clear that the business is full of brilliant people who are committed to the success of PZ and work hard every day to make it a reality. My first trip to Nigeria with Jonathan was in June and it was brilliant to get under the skin of how the business and the market there works. Understanding the recent financial history of the business and how this was impacted by the devaluation has been top of my list since joining. I'm pleased to say that the guardrails that Jonathan and the team have been embedding have greatly reduced potential risk in the future. As I've learned about the business, I see three areas where I want to focus and I feel I can make a difference. Firstly, in supporting the business, As we increasingly focus not only on investing in current year brands, campaigns and innovation, but also planning out over several years. This is largely about shifts in mindset and some of the principles of the longer term planning at the infrastructure companies I've worked at. Secondly, and related, is improving returns. We have been clear with our shareholders what to expect in terms of the financial algorithm. To really drive this, I now want each and every one of our teams to understand the role they play in delivering on our commitments and what it means as they think about investment and required returns. Whether that's money spent on TV commercial, a new line in a factory, or an IT systems upgrade. We also need an eye on how that criteria needs to vary depending on the developed or the emerging markets given the underlying differences in risk characteristics. Third, there are further opportunities for finance simplification. I'm a big user of AI myself and I want the finance team to be embedding these tools into our everyday work in order to free up time to support with value added decision making. Now let's move on to the numbers where we've had a strong year financially. Starting with the summary financials. Group revenue increased by 5.4% to $541 million with like-for-like revenue growth of 5.8%. That growth was broad-based with growth across each of our four lead markets and across our top 10 brands in their respective largest markets. Adjusted operating profit increased to 59.5 million, with the margin improving to 11%. On the more relevant comparison basis, which excludes the contribution from the PZ Wilmer joint venture in both years, adjusted operating profit increased by 24.5% and margin improved by 170 basis points. Moving further down the P&L, Net finance expense reduced significantly, reflecting the strengthening of the balance sheet. Adjusted profit before tax increased to just over 50 million, while adjusted earnings per share decreased to 7.14 pence. This decrease is driven by two factors. Firstly, a high effective tax rate which as explained at the half year is due to the post-tax income from PZ Wilmer joint venture no longer being recorded in our operating profit. And secondly, the mix of growth. With Africa's strong performance driving a proportionally higher minority interest charge and in particular as we saw strong growth in electricals in which we have a lower net ownership than elsewhere. Critically, free cash flow improved strongly to 54.7 million compared with 42.3 million last year, reflecting higher adjusted operating profit and lower cash exceptionals, partly offset by working capital outflow. Net debt reduced significantly from 112 million to 25 million, driven by the improved free cash flow. proceeds from the sale of our 50% stake in PZ Wilma and the disposal of surplus non-operating assets. As a result of the performance in FY26 and our confidence in the future, the board has proposed a dividend increase of 2.8% consistent with our progressive dividend policy. Turning now to revenue. The revenue bridge shows growth across each of the three reporting regions, each of the four lead markets, and in both the developed and the emerging parts of the portfolio. The single largest contribution has again been from growth in Nigeria. Pleasingly, although this was largely inflation driven, we have seen a much more stable economic environment in Nigeria. In fact, the movement in the Naira has been favorable with the red down bar for FX driven by the strengthening of sterling against other currencies. So turning to operating profit and with the 24.5% growth, I'm pleased with the quality of this delivery. We saw growth in both gross profit and reduction in overheads, thanks in part to 8.5 million structural cost savings, allowing us to increase marketing investment by 3.5 million. The 59.5 million operating profit we reported includes 5.4 million of FX gains as the revaluation of US dollar denominated liabilities in Nigeria reduced thanks to the appreciation of the Naira. This is a one-off gain in FY26 and so I would encourage you to think of our normalized operating profit from which we will grow in FY27 as being closer to 54 million. This slide links the FY26 performance back to the financial framework we set out at the capital markets event. Over the cycle, we are targeting mid single digit like for like revenue growth with increased marketing investment funded by gross margin expansion and overhead growth limited to be below that of revenue. I'm pleased to say that in FY26 we delivered against this framework. The result is improved quality of earnings, revenue growth supported by investment, productivity gains funding that investment, and a stronger, more resilient profit base. Looking now at the segments, starting with Europe and Americas. Revenue increased to 200 million, with like for like revenue growth of 0.9%. In the UK, our lead market Revenue grew 0.5% to $175 million. We delivered growth across the key washing and bathing brands Carex, Imperial Leather, Original Source and Sanctuary Spa, with Sanctuary Spa the biggest contributor driven by strong Christmas gifting. Outside the UK, revenue grew 3.8%. Most notably, and Sandra Paye returned to growth in North America, growing 6.9%, supported by the new operating model and partnership with Emerson. This was offset by some softness in continental Europe. Operating profit was broadly flat, as improved growth margins and good cost containment offset increases in marketing investment. Turning to APAC. Revenue was 173 million, up 3.9% on a like-for-like basis, but flat on a reported basis, reflecting movements in the Indonesian rupiah and Australian dollar. In ANZ, revenue grew 4% to 91 million, with growth across Morning Fresh, Radiant, and Rafferty's Garden. Morning Fresh benefited from strong performance in Autodish, Raff Teacups Garden grew strongly with early success from its relaunch into New Zealand and the one litre original source launch provided significant uplift to revenue. Indonesia grew 10.2% to $61 million, driven by Cousins Baby, with improvements in both price mix and volume. The growth was driven by the completion of the phased restaging of the overall brand. and e-commerce remained a major growth driver with strong growth across TikTok Shop and Shopee. The reduction in adjusted operating profit reflected increased marketing investment behind Autodish and the Cousins Baby restaging together with the depreciation of the Australian dollar and Indonesian rupiah. Moving to Africa. Revenue increased to $168 million, with like-for-like revenue growth of 14.7%. Revenue in our Nigerian lead market grew 22% to $133 million, with growth in both price mix and volume. We delivered double-digit growth across the majority of our largest brands, with Stellar particularly strong, supported by increased exports, and work to extend the purchase period beyond the seasonal peak of the harmattan dry season. Route to market improvements also continue to support performance as we again grew both the quantity and the quality of stores served. Our electricals business grew revenue by over 20%. Thank you for joining us. including support for the Carex launch. Turning now to cash flow and net debt. Net debt reduced by 87 million to 25 million. The big drivers here being the increase in free cash flow and disposal proceeds. Free cash flow was 54.7 million, up 12 million. supported by higher operating profit and less cash exceptionals. The Wilma disposal proceeds were 47.8 million with a further 27.6 million associated with surplus asset sales. You'll remember that in calculating leverage we exclude the benefit of the cash held within Nigeria of 24.5 million. So this results in the adjusted net debt to EBITDA of 0.7 times So below the one to one and a half times range set out as part of the capital allocation policy. Taking a step back, the balance sheet has been transformed over recent years with gross debt 174 million lower than three years ago. Related to the reduction in group debt is how our exposure to movements in the Naira has materially reduced. A major source of the impact on operating profit has been the intercompany liabilities within Nigeria's entity-denominated currency other than the Naira. As the Naira devalued, these liabilities increased in value, reducing our operating profit. The reduction in these liabilities has left us in a much stronger position. Historically, 100 Naira move would have driven more than £7 million impact on operating profit. Today that sensitivity on underlying operating profit is around 1.5 million pounds and we continue to work to decrease these liabilities and therefore the P&L sensitivity even further. Our capital allocation framework as set out at the capital markets event is clear. First we are targeting adjusted net debt that is excluding cash held in Nigeria to the adjusted EBITDA in the range of one to one and a half times. Second, we have adopted a progressive dividend policy. Third, we will consider bolt-on M&A and Jonathan will talk shortly about how Child's Farm represents something of a blueprint for what we're looking at. And fourth, cash returns to shareholders will be considered relative to those M&A opportunities. Given year-end adjusted net debt to EBITDA of 0.7 times, we now have substantial flexibility within that framework. So the key message is not that leverage has reduced. It is that stronger cash generation, portfolio simplification, and disciplined capital allocation have put the group in a much better position to invest behind growth, Support a progressive dividend and evaluate additional shareholder returns or M&A where it creates value. Finally, turning to current trading and FY27 guidance. As we said in the release this morning, the year has started in line with expectations. Like everyone else in the sector, we are mindful of the impact of the conflict in the Middle East. While there is still a number of unknowns, we have since the start of the crisis acted swiftly to understand and react to the impact, and believe that the large majority of the cost inflation can be offset by mitigating actions already in place. As a result, we are comfortable confirming current market expectations for operating profit, which range from 58 to 61.2 million, The H1-H2 split is expected to be more balanced than it was in FY26, where operating profit was skewed more towards H1, given the majority of the FX gains fell in the first half of the year and the majority of the marketing spend came in the second half. Based on spot rates, we don't currently foresee a material FX impact year-on-year, and we'd expect net debt to be lower again, reflecting continued strong underlying cash generation. Overall, we enter FY27 with good underlying momentum, a stronger balance sheet, reduced exposure to the Nigerian FX volatility and a better funded innovation pipeline. While there are external uncertainties to manage, the business is in a stronger position to continue delivering against the strategy and financial framework we have set out. And with that, I will hand back to Jonathan.